Tag: weak

The dollar held steady near a two-week high against a basket of currencies on Monday, as investor risk appetite held up despite the latest data showing China’s 2018 economic growth slowing to a near three-decade low. Along with a decline in Treasury yields earlier in the month which had accompanied the retreat in equities, the dollar index had slipped to a three-month low near 95.00 on Jan. 10. “Whether the current ‘risk on’ supporting the dollar can continue will likely depend on how U.S. corpo

The dollar held steady near a two-week high against a basket of currencies on Monday, as investor risk appetite held up despite the latest data showing China’s 2018 economic growth slowing to a near three-decade low.

The dollar index, which measures its strength against a group of six major currencies, was steady at 96.308 after climbing to 96.394 percent on Friday, its strongest since Jan. 4.

Hopes for a thaw in U.S.-China trade tensions, a more dovish-sounding Federal Reserve and optimism that Britain could avoid a “No-Deal” Brexit are some of the factors that have fanned the return in investor risk appetite, which went into a deep freeze in December as global equity markets tumbled.

Along with a decline in Treasury yields earlier in the month which had accompanied the retreat in equities, the dollar index had slipped to a three-month low near 95.00 on Jan. 10.

“The dollar index is clearly on a recovery track. The currency was stuck in a downtrend at the start of January but is now being bought back against its peers such as the yen, euro, pound and the Aussie,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Whether the current ‘risk on’ supporting the dollar can continue will likely depend on how U.S. corporate earnings turn out. The United States and China falling out again over trade issues and volatile U.S. politics still remain the main potential risk factors.”

The U.S.-China trade friction has already put pressure on China’s economy, with the latest data showing the world’s second-biggest economy slowing further in the last quarter of 2018. Markets appeared to take the outcome, largely in line with expectations, in their stride.

The dollar was down 0.1 percent at 109.64 yen, taking a pause after climbing to a three-week high of 109.895 on Friday. The greenback had gained more than 1 percent against its Japanese peer last week.

The euro nudged up 0.15 percent to $1.1376 but remained in close reach of a two-week low of $1.1353 brushed on Friday.

The pound was 0.1 percent lower at $1.2860.

Sterling had climbed to a two-month peak of $1.3001 on Thursday on growing confidence that Britain can avoid leaving the European Union without a deal, but faced profit-taking on Friday.

“The pound is at current levels based on assumption that a no deal Brexit has been avoided. But even an exit with a deal will likely leave some damage on the economy, so it is difficult to see the pound make much further headway from here,” said Koji Fukaya, president at FPG Securities in Tokyo.

British Prime Minister Theresa May will on Monday put forward a motion on her proposed next steps. Over the following week, lawmakers will be able to propose alternatives. They will debate these plans on Jan. 29, and voting on them should indicate whether any could get majority support.

The Australian dollar was steady at $0.7166 after ending Friday on a loss of 0.3 percent.

The Aussie was largely unfazed by China’s growth numbers though analysts agree that any sharp drop in demand from its biggest trading partner would put a dent in local assets.

Australia’s close trading links with the world’s second-biggest economy means its currency is often regarded as a proxy to China-related trades.

The 10-year Treasury note yield rose to a three-week high of 2.799 percent on Friday, continuing its rise from a one-year low of 2.543 percent plumbed early in January.

The U.S. financial markets will be closed on Monday for Martin Luther King Jr. Day.

Brent crude oil prices fell below $60 per barrel on Monday after Chinese data showed weakening imports and exports in the world’s biggest trading nation. International Brent crude oil futures were at $59.78 per barrel at 0312 GMT, down 70 cents, or 1.2 percent from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 63 cents, or 1.2 percent, $50.96 a barrel. China’s December exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official

International Brent crude oil futures were at $59.78 per barrel at 0312 GMT, down 70 cents, or 1.2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 63 cents, or 1.2 percent, $50.96 a barrel.

China’s December exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official data showed on Monday, pointing to further weakening in the world’s second-largest economy. Imports also contracted, falling 7.6 percent, the biggest decline since July 2016.

Traders said the data pulled down crude oil futures and Asian stock markets alike, which had both posted modest gains earlier on Monday.

Economic research firm TS Lombard said oil prices were capped as “the world economy is now slowing … limiting the scope for positive surprises in oil demand and hampering inventory reduction.”

Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said “the deterioration seen recently in forward-looking economic data from the U.S. to Europe and China” meant that the upside for crude oil futures was likely limited to $64 per barrel for Brent and for $55 for WTI.

The weak Chinese data countered general support that oil markets have been receiving since the start of the year from supply cuts from the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia.

In the United States, drillers cut four oil rigs in the week to Jan. 11, bringing the total count down to 873, energy services firm Baker Hughes said in a weekly report on Friday.

U.S. government debt prices were higher on Monday morning, as investors monitored developments in U.S. politics and weak data out of China. The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.6757 percent, while the yield on the 30-year Treasury bond was also lower at 3.0219 percent. The moves in pre-market trade come after fresh data out on Monday showed Chinese December exports and imports dropping unexpectedly. These figures deepened concern

U.S. government debt prices were higher on Monday morning, as investors monitored developments in U.S. politics and weak data out of China.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.6757 percent, while the yield on the 30-year Treasury bond was also lower at 3.0219 percent.

The moves in pre-market trade come after fresh data out on Monday showed Chinese December exports and imports dropping unexpectedly. These figures deepened concerns of a slowdown in the world’s second-largest economy.

“A combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market volatility are taking a toll on the UK’s financial services sector,” CBI Chief Economist Rain Newton-Smith said. Britain’s parliament is expected to vote on Tuesday to reject the divorce settlement with the European Union, an outcome that would prolong uncertainty for the financial sector. It marks a reversal for investment management, which has grown well since the financial crisis as risk-averse ban

Uncertainty over Brexit and the economy have led demand for Britain’s financial services to shrink for the first time in five years, with no immediate sign of an improvement, a survey by business group CBI and PwC showed.

And profitability in the sector which raises most tax in Britain was flat for the third quarter in a row in the three months to December 2018, the survey released on Monday said.

The survey of 84 firms said demand is expected to continue falling during the quarter to March, with profitability also expected to drop for the first time in three years.

“The persistent weakness in optimism and the deterioration in expectations sound a warning for the outlook.”

Britain’s parliament is expected to vote on Tuesday to reject the divorce settlement with the European Union, an outcome that would prolong uncertainty for the financial sector.

But many banks, insurers and asset managers who use Britain as their EU base are opening hubs in the bloc to avoid being locked out of the continent if Britain crashes out of the EU in March without a deal.

The survey painted a mixed picture for the sector, with business holding up among insurers, while volumes were flat or easing at banks, building societies and specialist lenders.

The survey found a “striking loss of momentum” at investment managers, who reported the steepest fall in activity since the financial crisis a decade ago.

A large majority of investment management firms surveyed were less optimistic about their prospects in coming months, with business from overseas customers taking a hit.

It marks a reversal for investment management, which has grown well since the financial crisis as risk-averse banks draw in their horns. It now faces volatile asset prices and weaker demand, the survey showed.

Despite an overall gloomy tone, headcount in the financial sector is expected to rise in the current quarter and investment intentions remain broadly stable, the survey said.

The combination of lower mortgage rates and an unusually slow end to 2018 caused mortgage applications to surge to start this year. A sharp drop in interest rates to the lowest level since April sparked a mini-boom in refinancing. Mortgage applications to purchase a home also jumped 17 percent last week but were just 4 percent higher than a year ago. “Stock prices and interest rates moved lower together for the better part of 2 months. While that would be great news for stock market investors, i

The combination of lower mortgage rates and an unusually slow end to 2018 caused mortgage applications to surge to start this year.

Overall volume jumped 23.5 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An adjustment was also made for the New Year’s Day holiday. Volume was still 9 percent lower than a year ago.

A sharp drop in interest rates to the lowest level since April sparked a mini-boom in refinancing. Those applications surged 35 percent week-to-week to their highest level since July. Volume was still lower by nearly 22 percent than a year ago, when the average rate on the 30-year fixed mortgage was 51 basis points lower.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.74 percent, from 4.84 percent, with points increasing to 0.47 from 0.42 (including the origination fee) for loans with a 20 percent down payment. The rate is 22 basis points lower than four weeks ago.

“Mortgage rates fell across the board last week and applications rebounded sharply, after what was a slower than usual holiday period” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “This drop in rates spurred a flurry of refinance activity — particularly for borrowers with larger loans — and pushed the average loan size on refinance applications to the highest in the survey (at $339,800).”

Mortgage applications to purchase a home also jumped 17 percent last week but were just 4 percent higher than a year ago. Buyers returning to the market after the holidays may have been inspired by the drop in rates, but stock market volatility and the government shutdown could keep some of those applications from closing.

Just over 10 percent of real estate agents surveyed by the National Association of Realtors said the shutdown was having an impact on their clients. Some reported government employees pulling out of purchase offers and others being denied loans due to loss of income. Some reported nongovernment employees changing their minds on purchases due to overall concern and uncertainty about the economy.

“The housing industry was already facing market challenges before any government closure,” NAR chief economist Lawrence Yun said in a release. “The shutdown has made matters worse. A home purchase is a major expenditure that simultaneously involves a high level of excitement and anxiety, and the current government shutdown adds another layer of unnecessary complication to the home buying process.”

Mortgage rates made a U-turn to start this week, however, now at the highest level since Dec. 31.

“While it’s only 3 days of weakness in the mortgage market, the concern is that it could be part of a much larger market trend,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Stock prices and interest rates moved lower together for the better part of 2 months. The risk is that we’re only in the early phase of a bigger correction. While that would be great news for stock market investors, it would be less pleasant for those with a vested interest in lower mortgage rates.”

Recent signals about the world’s second-largest economy point to weaker growth, including tech giant Apple recently lowering revenue guidance for the first quarter as it blamed a variety of factors including Chinese demand. And, on Monday, Hong Kong-listed automaker Geely said it missed its sales target in 2018 and was forecasting flat sales in 2019.

“It’s intriguing that the domestic demand part is the weak part — the external demand is not that bad,” said Taimur Baig, chief economist at DBS Group Research.

Last year, China reported economic growth of 6.5 percent in the third quarter — marking its weakest pace since the global financial crisis. Still, the country’s official growth target for 2018 was around 6.5 percent.

While official data indicated China’s economy held up for much of last year, it now appears to be slowing as production metrics and export orders fall amid the country’s trade dispute with the U.S., its largest trading partner.

Beyond the tariffs battle, China’s economy has been facing its own domestic headwinds. Even before U.S. President Donald Trump kicked off the latest escalation in trade tensions, Beijing was already trying to manage a slowdown in its economy after decades of breakneck growth.

Despite negotiations between the two economic giants underway in Beijing, Baig said it was unlikely that the trade war would end in the next three to six months because the areas of disagreement extend far beyond imports and exports.

In fact, he said, “We will breathe a little sigh of relief if things don’t get worse.”

At the beginning of December, Trump and Chinese President Xi Jinping agreed to a 90-day ceasefire that delayed the planned U.S. increase of tariffs on $200 billion worth of Chinese goods that were initially due to take effect on Jan. 1, while the two sides tried to negotiate a deal.

A positive signal, according to Baig, would be an extension of the three-month truce into the summer, giving the global economy some respite for the first half of the year.

These last two points have led us to reduce our revenue guidance. Our results in China include a new record for Services revenue, and our installed base of devices grew over the last year. iPhoneLower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19

There have been several reports pointing to weak iPhone sales in recent months. Some Apple suppliers cut their estimates last quarter, leading many to speculate consumers weren’t upgrading to the new models. Apple also took the unusual step of promoting discounted prices for iPhones on its website if customers traded in an older model. The company also increased the trade-in value of some older iPhone models.

Despite the lowered guidance, Cook did point out some growth areas in the letter to investors. He said Apple’s device install base increased by 100 million units over the last year. Apple has been promoting its growing install base as a way to show it can squeeze more revenue out of each of its uses through subscription services like iCloud storage and Apple Music. The company is said to be considering new subscription products through its Apple News and TV apps as well.

“We had sort of a collection of items going on. Some that are macroeconomic and some that are Apple specific,” Cook said in his CNBC interview. “And we’re not going to sit around waiting for the macro to change. I hope that it does and I’m actually optimistic, but we are going to focus really deeply on the things we can control.”

Here’s the full letter from Cook to investors:

To Apple investors:

Today we are revising our guidance for Apple’s fiscal 2019 first quarter, which ended on December 29. We now expect the following:

• Revenue of approximately $84 billion

• Gross margin of approximately 38 percent

• Operating expenses of approximately $8.7 billion

• Other income/(expense) of approximately $550 million

• Tax rate of approximately 16.5 percent before discrete items

We expect the number of shares used in computing diluted EPS to be approximately 4.77 billion.

Based on these estimates, our revenue will be lower than our original guidance for the quarter, with other items remaining broadly in line with our guidance.

While it will be a number of weeks before we complete and report our final results, we wanted to get some preliminary information to you now. Our final results may differ somewhat from these preliminary estimates.

When we discussed our Q1 guidance with you about 60 days ago, we knew the first quarter would be impacted by both macroeconomic and Apple-specific factors. Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter. As you may recall, we discussed four factors:

First, we knew the different timing of our iPhone launches would affect our year-over-year compares. Our top models, iPhone XS and iPhone XS Max, shipped in Q4’18 — placing the channel fill and early sales in that quarter, whereas last year iPhone X shipped in Q1’18, placing the channel fill and early sales in the December quarter. We knew this would create a difficult compare for Q1’19, and this played out broadly in line with our expectations.

Second, we knew the strong US dollar would create foreign exchange headwinds and forecasted this would reduce our revenue growth by about 200 basis points as compared to the previous year. This also played out broadly in line with our expectations.

Third, we knew we had an unprecedented number of new products to ramp during the quarter and predicted that supply constraints would gate our sales of certain products during Q1. Again, this also played out broadly in line with our expectations. Sales of Apple Watch Series 4 and iPad Pro were constrained much or all of the quarter. AirPods and MacBook Air were also constrained.

Fourth, we expected economic weakness in some emerging markets. This turned out to have a significantly greater impact than we had projected.

In addition, these and other factors resulted in fewer iPhone upgrades than we had anticipated.

These last two points have led us to reduce our revenue guidance. I’d like to go a bit deeper on both.

Emerging Market Challenges

While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.

Despite these challenges, we believe that our business in China has a bright future. The iOS developer community in China is among the most innovative, creative and vibrant in the world. Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction. Our results in China include a new record for Services revenue, and our installed base of devices grew over the last year. We are proud to participate in the Chinese marketplace.

iPhone

Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.

While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.

Many Positive Results in the December Quarter

While it’s disappointing to revise our guidance, our performance in many areas showed remarkable strength in spite of these challenges.

Our installed base of active devices hit a new all-time high — growing by more than 100 million units in 12 months. There are more Apple devices being used than ever before, and it’s a testament to the ongoing loyalty, satisfaction and engagement of our customers.

Also, as I mentioned earlier, revenue outside of our iPhone business grew by almost 19 percent year-over-year, including all-time record revenue from Services, Wearables and Mac. Our non-iPhone businesses have less exposure to emerging markets, and the vast majority of Services revenue is related to the size of the installed base, not current period sales.

Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020.

Wearables grew by almost 50 percent year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers; launches of MacBook Air and Mac mini powered the Mac to year-over-year revenue growth and the launch of the new iPad Pro drove iPad to year-over-year double-digit revenue growth.

We also expect to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea. And, while we saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam.

Finally, we also expect to report a new all-time record for Apple’s earnings per share.

Looking Ahead

Our profitability and cash flow generation are strong, and we expect to exit the quarter with approximately $130 billion in net cash. As we have stated before, we plan to become net-cash neutral over time.

As we exit a challenging quarter, we are as confident as ever in the fundamental strength of our business. We manage Apple for the long term, and Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability and creativity, and to emerge better as a result.

Most importantly, we are confident and excited about our pipeline of future products and services. Apple innovates like no other company on earth, and we are not taking our foot off the gas.

We can’t change macroeconomic conditions, but we are undertaking and accelerating other initiatives to improve our results. One such initiative is making it simple to trade in a phone in our stores, finance the purchase over time, and get help transferring data from the current to the new phone. This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone, and it is great for developers, as it can help grow our installed base.

This is one of a number of steps we are taking to respond. We can make these adjustments because Apple’s strength is in our resilience, the talent and creativity of our team, and the deeply held passion for the work we do every day.

Expectations are high for Apple because they should be. We are committed to exceeding those expectations every day.

Citi Research on Friday slashed its first-quarter production estimates for Apple iPhones and nearly halved expectations on the costliest iPhone XS Max, joining other brokerages in lowering forecast amid reports of weak demand. The cut was mainly due to weak outlook for the iPhone XS Max, analyst William Yang said in a research note. The brokerage lowered its forecast for the iPhone XS Max, which starts at $1,099, by 48 percent. According to a Wall Street Journal report in November, Apple cut pro

Citi Research on Friday slashed its first-quarter production estimates for Apple iPhones and nearly halved expectations on the costliest iPhone XS Max, joining other brokerages in lowering forecast amid reports of weak demand.

“The material cut in our forecasts is driven by our view that 2018 iPhone is entering a destocking phase, which does not bode well for the supply chain,” analyst William Yang wrote in a client note.

Citi said it expects the company to make 45 million iPhones for the quarter, down from 50 million it forecast earlier. The cut was mainly due to weak outlook for the iPhone XS Max, analyst William Yang said in a research note.

The brokerage lowered its forecast for the iPhone XS Max, which starts at $1,099, by 48 percent.

According to a Wall Street Journal report in November, Apple cut production orders for all three iPhone models launched in September.

Shares in Apple’s Asian suppliers and assemblers slid in November after several component makers forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets.

The brokerage that has “sell” ratings on iPhone assemblers Hon Hai Precision Industry and Foxconn Technology, said it sees Hon Hai as particularly vulnerable, with higher exposure to the new models.

The dollar consolidated losses on Monday after posting its biggest weekly drop in more than three months last week as weak U.S. data undercut expectations of more interest rate increases in the world’s biggest economy. But weak data in recent weeks has clouded the currency’s prospects for next year. Against a basket of currencies, the dollar was flat after falling 0.8 percent last week, its biggest weekly drop since late August. In London, Theresa May faces an internal revolt against her Brexit

The dollar consolidated losses on Monday after posting its biggest weekly drop in more than three months last week as weak U.S. data undercut expectations of more interest rate increases in the world’s biggest economy.

Widening interest rate differentials between the United States and the rest of the world, driven by a confident U.S. Federal Reserve, has fuelled an unlikely dollar rally this year. But weak data in recent weeks has clouded the currency’s prospects for next year.

U.S. non-farm payrolls increased by 155,000 jobs last month, below a median forecast of 200,000 jobs, and the wage increase was weaker than expected, even though its annual rise remained near the highest level in almost a decade.

Apart from weak data, some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in its monetary policy and lowering the expectations of U.S. rate hikes priced into money markets.

Futures markets are now pricing in only a 44 percent chance of a U.S. rate increase next year compared with nearly 80 percent last Monday as the U.S. bond yield curve has flattened.

“Fed fund expectations are dropping like a stone and that is a big obstacle for the dollar, though there is plenty of event risk out there this week that will give plenty of thought for dollar bears,” said Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt.

Against a basket of currencies, the dollar was flat after falling 0.8 percent last week, its biggest weekly drop since late August.

The euro led gains, rising 0.34 percent at $1.1470 though market traders said currency markets will be in a wait-and-watch mode.

French President Emmanuel Macron will address the country at 2000 Paris time (1900 GMT) on Monday as he seeks to “yellow vest” anti-government protesters that have wreaked havoc in Paris during the weekend.

In London, Theresa May faces an internal revolt against her Brexit deal before a vote in the parliament on Tuesday. May plans to push ahead with the vote, but senior lawmakers in her own party put pressure on her to go back to Brussels and seek a better offer.

A rejection could throw plans for Britain’s exit into turmoil and leave her own political future hanging in the balance. Against the dollar, the British pound was flat at $1.2720.

China reported far weaker than expected November exports and imports, showing slower global and domestic demand and raising the possibility authorities will take more measures to keep the country’s growth rate from slipping too much. Analysts say the export data showed that the “front-loading” impact as firms rushed out shipments to beat planned U.S. tariff hikes faded, and that export growth is likely to slow further as demand cools. The customs data showed that annual growth for exports to all

China reported far weaker than expected November exports and imports, showing slower global and domestic demand and raising the possibility authorities will take more measures to keep the country’s growth rate from slipping too much.

November exports only rose 5.4 percent from a year earlier, Chinese customs data showed on Saturday, the weakest performance since a 3 percent contraction in March, and well short of the 10 percent forecast in a Reuters poll.

Analysts say the export data showed that the “front-loading” impact as firms rushed out shipments to beat planned U.S. tariff hikes faded, and that export growth is likely to slow further as demand cools.

The customs data showed that annual growth for exports to all of China’s major partners slowed significantly. Exports to the United States rose 9.8 percent in November from a year earlier, compared with 13.2 percent in October.

To the European Union, shipments increased 6.0 percent, compared with 14.6 percent in October. Exports to South Korea fell from a year earlier, while in October they rose 7.7 percent.